Dollar
Firms, Buoyed by Economic Data
Fri January 30, 2004 11:14 AM
ET
(Page 1 of 2) By Manuela Badawy NEW YORK (Reuters) - The
dollar moved higher against the euro on Friday after reports showing U.S. consumer
sentiment remained strong in January and business activity in the U.S. Midwest
expanding for a ninth straight month and at a faster pace. The greenback's
advance signaled to some analysts that the U.S. economic panorama was returning
to forex traders' radar screens as a primary factor driving the dollar. The
National Association of Purchasing Management-Chicago index showed a better than
expected manufacturing activity in the Midwest in January at 65.9 compared to
an upwardly revised 61.2 in December. Analysts polled by Reuters were expecting
a reading of 62.0 in January. "The Chicago PMI was certainly better than expected.
The dollar rose further on that. Perhaps short-term dollar gains were mitigated
somewhat by the fact that euro/dollar had come down 30 or 40 ticks in the 10 minutes
or so prior to the (Chicago) data limiting the extent to which (the euro) was
able to move lower," Robert Lynch, senior currency strategist, BNP Paribas, New
York. The University of Michigan's final reading of January's consumer sentiment
index showed a stronger than expected 103.8, up from 92.6 in December, supported
by lower interest rates, better job prospects and stock market gains fueled by
robust earnings. Analysts had expected the January reading at 103.0. "The dollar
moved higher after the University of Michigan report, maybe because the Michigan
number was revised up even though the revision was quite small. The number was
good and maybe the market was a little bit braced for a slight downward revision,"
Lynch said. The U.S. economy grew at a 4 percent annual rate in the final three
months of last year; surprisingly lower than expected, the government reported
on Friday. GDP had been expected to show annualized growth of 4.8 percent in the
fourth quarter, according to a Reuters poll, following a sizzling 8.2 percent
pace in the third quarter. "We all knew that Q3 couldn't last forever," said
Lara Rhame, senior economist foreign exchange at Brown Brothers Harriman &
CO., in New York. "Four percent is going to feel like a disappointment compared
to the consensus and compared to Q3 but it is still a very respectable rate of
growth and details show that the recovery is well on track including solid growth,
and private investment data," Rhame said. By mid morning on Friday in New York,
the euro (EUR=: Quote
, Profile
, Research
) was down 0.2 percent at $1.2382 because of the strong U.S. data. The
dollar had been rallying since the Federal Reserve surprised the market on Wednesday
by dropping its pledge to keep rates low for a "considerable period." The central
bank replaced that phrase with an assurance that it "can be patient" in removing
its policy accommodation. Continue with: | 
